Franqui v. Liberty Mut. Fire Ins. Co.

Decision Date18 March 2014
Docket NumberCase No.: 8:12-cv-01257-T-27MAP
CourtU.S. District Court — Middle District of Florida
PartiesANDRES FRANQUI et al., Plaintiffs, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant
ORDER

This dispute involves the denial of a claim for sinkhole loss made under a homeowner's policy issued by Liberty Mutual to the Franquis. The dispute focuses on the construction of an undefined term in the sinkhole loss coverage provision of the policy. Before the Court is Plaintiffs' Motion for Summary Judgment Pursuant to Joint Stipulation of Fact (Dkt. 47) and Defendant's opposition (Dkt. 55). Notwithstanding the Joint Stipulation of Fact (Dkt. 39) and the parties' attempts to narrow the issues for trial, they remain at odds with respect to what constitutes "structural damage," as that term is used in the policy to define "sinkhole loss." And notwithstanding my earlier construction of the term "structural damage," the parties disagree on what constitutes "damage to the structure."

Considering the parties' renewed arguments, and particularly in light of Defendant's contention that "in the event that this Court instructs the jury that the term 'structural damage' means something other than simply 'damage to the structure' then material issues of fact remain as to whether Plaintiffs have met their burden," my construction of the term "structural damage" in the policy as "damage to the structure" (see Dkt. 22) remains incomplete, in that it fails to distinguishbetween cosmetic damage to the building's structure and damage to the structural components of the building.1 I therefore exercise my prerogative under Rule 60(a), Fed. R. Civ. P., to reconsider construction of the term, and vacate the prior summary judgment orders, Dkts. 15 and 22.2

Finding that the phrase "structural damage to the building" should be construed as " damage to the structural components of the building, excluding damage that is cosmetic in nature," Defendant's Motion for Summary Judgment (Dkt. 11) is DENIED, Plaintiffs' Motion for Partial Summary Judgment (Dkt. 17) is GRANTED in part and DENIED in part, and Plaintiffs' Motion for Summary Judgment Pursuant to Joint Stipulation of Fact (Dkt. 47) is DENIED.

I. INTRODUCTION

The homeowner's policy issued by Liberty Mutual contains the following language providing coverage for damage caused by sinkholes:

SECTION I - PERILS INSURED AGAINST
The following perils are added:
Sinkhole Loss
a. Sinkhole Loss means structural damage to the building, including the foundation, caused by sinkhole activity. Contents coverage shall apply only if there is structural damage to the building caused by sinkhole activity.
(1) We will pay to stabilize the land and building and repair the foundation in accordance with the recommendations of a professional engineer and in consultation with you.
b. Sinkhole Activity means settlement or systematic weakening of the earth supporting such property only when such settlement or systematic weakening results from movement or raveling of soils, sediments, or rockmaterials into subterranean voids created by the effect of water on a limestone or similar rock formation.
The SECTION I - Earth Movement exclusion does not apply to this peril.

(Dkt. 11-1 at 30) (emphasis added).

Plaintiffs' claim for sinkhole damage to their residence was denied by Liberty Mutual, which took the position that the damage did not constitute "sinkhole loss" as defined in the policy. Specifically, Liberty Mutual informed Plaintiffs that their residence had not sustained "structural damage" and the policy did not provide coverage for "wear and tear, latent defect, and settling" (Dkt. 18-2 at 1). Plaintiffs filed suit against Liberty Mutual alleging breach of contract, which was removed to this Court. Liberty Mutual answered and filed a Counterclaim for declaratory judgment that the policy does not provide coverage unless the loss includes "damage that impairs the structural integrity of the building" (Dkt. 3 at 10 ¶ 40).

Both parties thereafter filed motions for summary judgment. In Liberty Mutual's motion (Dkt. 11), it argued that the five-part definition of "structural damage" in the May 17, 2011 amendments to § 627.706, Florida Statutes, should be applied retroactively. It also argued that the term "structural damage" as used in the policy is not ambiguous and should be afforded its plain meaning, which Liberty Mutual argues is consistent with the revised definition in § 627.706. The motion was denied on all grounds (Dkt. 15).

After Liberty Mutual's motion was denied, Plaintiffs filed their motion for partial summary judgment (Dkt. 17). Plaintiffs sought (1) an order granting partial summary judgment on the breach of contract claim based on Liberty Mutual's failure to conduct an investigation as required by § 627.707, Florida Statutes; (2) an order granting partial summary judgment on Plaintiffs' argument that the definition of "structural damage" in § 627.706 cannot be applied retroactively; and (3) an order granting partial summary judgment on the proper definition of "structural damage." Themotion was denied on the first ground but granted on the second and third (Dkt. 22). Specifically, it was reiterated that the definition of "structural damage" found in the 2011 amendments to § 627.706 could not be applied retroactively. Secondly, the term "structural damage" was found to be unambiguous and construed as "damage to the structure" (see Dkt. 22 at 3).3

After the pretrial conference, the parties filed their "Joint Stipulation of Fact and Plaintiffs' Request for Verdict on Facts" (Dkt. 39), purportedly based on the construction of the term "structural damage" as "damage to the structure." The parties stipulated to only three facts: (1) there is damage to the structure; (2) Liberty Mutual's expert cannot eliminate sinkhole activity as a cause of the damage to the building; and (3) the cost to repair all present damage and damage anticipated by Plaintiffs' experts is $42,433.11 (Dkt. 39 at 3). The parties contended that these stipulated facts left no further factual determinations for the jury. Plaintiffs then filed a motion for summary judgment based on the stipulation, which is pending.

II. STANDARD

District courts may "correct . . . a mistake arising from oversight or omission whenever one is found in a judgment, order, or other party of the record . . . on motion or on its own, with or without notice." Fed. R. Civ. P. 60(a). Summary judgment is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A genuine factual dispute exists only if a reasonable fact-finder 'could find by a preponderance of the evidence that the [non-movant] is entitled to a verdict.'" Kernel Records Oy v. Mosley, 694 F.3d 1294, 1300 (11th Cir. 2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). A fact is material if it may affect the outcome of the suit under the governing law.Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997).

III. DISCUSSION

Two distinct issues are presented, both concerning the proper construction of the sinkhole loss clause in the policy. First, Liberty Mutual again argues that the definition of "structural damage" in § 627.706, Florida Statutes, should be applied retroactively to Plaintiffs' policy. Second, although Plaintiffs and Liberty Mutual both contend that the term "structural damage to the building" is unambiguous, they disagree on how the term should be interpreted.

A. Retroactivity

In the Order denying Liberty Mutual's motion for summary judgment (Dkt. 15), Defendant's retroactivity argument was expressly rejected, based on this Court's order in Bay Farms Corp. v. Great Am. Alliance Ins. Co., 835 F. Supp. 2d 1227 (M.D. Fla. 2011) (Whittemore, J.). In Bay Farms, I determined that the definition in the 2011 amendments to § 627.706 could not be applied retroactively to policies issued prior to the effective date of the amendments. There is no reason to depart from this conclusion.

B. Interpretation of the Phrase "Structural Damage to the Building"
1. Canons of Insurance Policy Interpretation

In Florida, an insurance policy is considered a contract and ordinary contract principles therefore govern the policy's interpretation and construction. Graber v. Clarendon Natl Ins. Co., 819 So. 2d 840, 842 (Fla. 4th DCA 2002), The interpretation of an insurance policy, including a determination and resolution of any ambiguity, are questions of law. Id.; Dahl-Eimers v. Mut. of Omaha Life Ins. Co., 986 F.2d 1379, 1381 (11th Cir. 1993) (citing Sproles v. Am. States Ins. Co., 578 So. 2d 482, 484 (Fla. 5th DCA 1991); Gulf Tampa Drydock Co. v. Great Atl. Ins. Co., 757 F.2d 1172, 1174 (11th Cir. 1985)).

In general, coverage clauses in insurance policies are interpreted in the broadest possiblemanner to effect the greatest amount of coverage. Westmoreland v. Lumbermens Mut. Cas. Co., 704 So. 2d 176, 179 (Fla. 5th DCA 1997). In contrast, exclusionary clauses are strictly construed in a manner that affords the broadest possible coverage. Id. And insurance polices are construed in accordance with their plain language. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000). As with other contracts, an insurance policy should receive a construction that is "reasonable, practical, sensible, and just." Gen. Star Indem. Co. v. W. Fla. Village Inn, Inc., 874 So.2d 26, 29 -30 (Fla. 2d DCA 2004). And terms in a policy "should be read in light of the skill and experience of ordinary people." Id.

Importantly, for purposes of the instant motions, when a term is left undefined in a policy or the policy fails to include qualifying or exclusionary language, an insurer cannot insist upon a narrow, restrictive interpretation of the coverage provided. Nat 7 Merck Co., Inc. v. United Service Auto. Ass'n 400 So.2d 526, 530 (Fla. 1st DCA 1981). When a word or phrase remains...

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